Speaker 1: Welcome to Tech Stuff, a production from iHeartRadio. Hey there,
Speaker 1: and welcome to tech Stuff. I'm your host, Jonathan Strickland.
Speaker 1: I'm an executive producer with iHeart Podcasts and How the
Speaker 1: tech are you? You know, I've talked about streaming an
Speaker 1: awful lot on the show. Now just for context tech Stuff.
Speaker 1: This podcast began after Netflix had already kind of got
Speaker 1: the ball rolling back in January two thousand and seven,
Speaker 1: so I didn't have an episode that covered the story
Speaker 1: of Netflix launching its online video streaming But in twenty
Speaker 1: thirteen we did do an episode about the Big three
Speaker 1: streaming services, which at that time included Netflix, Amazon, and
Speaker 1: Today's Star Hulu. So we're doing actually a two parter
Speaker 1: on Hulu. This will be part one. So even back
Speaker 1: then we mentioned how there were other offerings available beyond
Speaker 1: the Big three, but today it's almost a joke with
Speaker 1: how many services are out there, and it's come as
Speaker 1: no surprise that we're starting to see these different services
Speaker 1: kind of glom on and merge together, either in bundles
Speaker 1: like the one Comcast is going to offer with Netflix,
Speaker 1: Peacock and Apple TV Plus, or in outright mergers and
Speaker 1: acquisitions such as what's happened with Disney and you know Hulu.
Speaker 1: It's almost like the streaming landscape is slowly transforming into
Speaker 1: what cable television used to be. And we already know
Speaker 1: that cable TV's business model has a ceiling because we
Speaker 1: hit that ceiling. That's why we're seeing things kind of
Speaker 1: in a decline or one of the reasons why I
Speaker 1: shouldn't be so definitive, I guess. Anyway, all that's beside
Speaker 1: the point. I want to talk about Hulu. How Hulu
Speaker 1: got started, because it's an interesting origin, and how the
Speaker 1: service and company evolved, and how now it is co
Speaker 1: mingling with Disney Plus, even as the actual acquisition deal
Speaker 1: is still kind of finalizing, despite the fact that Disney
Speaker 1: paid the quote unquote final fee last year. That whole
Speaker 1: story is just it really just points to corporate shenanigans, honestly,
Speaker 1: in my opinion at least, So let's start off at
Speaker 1: the beginning, where I am told it's a very good
Speaker 1: place to start. So hulu story, at least, the part
Speaker 1: of Hulu's story that faced the public, began in March
Speaker 1: two thousand and seven. Hulu, which was not named at
Speaker 1: this point. It didn't have its name, but what would
Speaker 1: become Hulu was announced as a joint venture between newscre
Speaker 1: and what at that time was just plain old NBC Universal.
Speaker 1: Comcast would announce plans to acquire NBC Universal two years later,
Speaker 1: and so things would get more complicated down the line.
Speaker 1: Now this is where my memory actually plays tricks on me,
Speaker 1: because when I was thinking about this before I actually
Speaker 1: started to dig into all the different articles and blog
Speaker 1: posts and stuff around the time of Hulu's launch. In
Speaker 1: my head, Hulu was meant to be a counter to
Speaker 1: Netflix because Netflix was getting into video streaming. But as
Speaker 1: it turns out, that really isn't the case when you're
Speaker 1: talking about the two thousand and six two thousand and
Speaker 1: seven era, because at that stage, Netflix wasn't really seen
Speaker 1: as that large of a threat, right. I mean, Netflix
Speaker 1: had killed Blockbuster arguably, but it wasn't thought to be
Speaker 1: setting its sites on traditional broadcast and cable media. Instead,
Speaker 1: Netflix was essentially viewed as Blockbuster by mail because it
Speaker 1: was much better known for its DVD and Blu ray
Speaker 1: rental services than as a video streaming platform. So this
Speaker 1: was well before Netflix would shake things up with its
Speaker 1: own original programming like House of Cards. House of Cards
Speaker 1: didn't debut until twenty thirteen, so Netflix was not seen
Speaker 1: as a existential threat at this point. Instead, Hulu's reisondetre
Speaker 1: had more to do with piracy that was happening on
Speaker 1: YouTube and how internet streaming was starting to show signs
Speaker 1: that it could impact traditional cable television, as well as
Speaker 1: concerns about a company that was on a metaphorical rocket
Speaker 1: ship around this time, and in that case, I'm specifically
Speaker 1: talking about Apple, not Netflix. But first let's start with YouTube.
Speaker 1: So Steve Chen and jau Ed Karim and Chad Hurley
Speaker 1: founded YouTube in two thousand and five. These days you
Speaker 1: can find epic long videos on YouTube. In fact, over
Speaker 1: the weekend yesterday, I was watching a four hour video
Speaker 1: from Jenny Nicholson, who produces phenomenal video essays. They're few
Speaker 1: and far between, but she puts a ton of work
Speaker 1: into them, and she did a four hour video about
Speaker 1: her experience at the Star Wars Galactic Cruiser Hotel at
Speaker 1: Disney World, and it's fascinating. It's a little it's very
Speaker 1: cringey at times if you're not into like participatory theater.
Speaker 1: Even as someone who has performed in participatory theater. I
Speaker 1: found it a bit cringey at times, not because of Jenny,
Speaker 1: but because of the situation that was going on. And
Speaker 1: it's also like just frustrating to see someone who is
Speaker 1: clearly so passionate about Star Wars and who has a
Speaker 1: really good platform ended up having a really, I would argue,
Speaker 1: lackluster experience for a premium price. Anyway, I don't know
Speaker 1: Jenny Nicholson, she doesn't know me. I just like her work.
Speaker 1: And the point was that today you can watch four
Speaker 1: hour long videos on YouTube if you want to. But
Speaker 1: you know, the interesting thing is when YouTube first launched,
Speaker 1: there wasn't really a limitation on video length back then either. Now,
Speaker 1: the resolution for YouTube videos was way way lower, but yeah,
Speaker 1: you weren't limited to short videos. However, that changed in
Speaker 1: the spring of two thousand and six, and the reason
Speaker 1: for that change is because a lot of the longer
Speaker 1: videos that were getting uploaded to YouTube were bootlegs or
Speaker 1: pirated copies or unauthorized uploads of films and TV shows.
Speaker 1: So that was what was making studios angry. It was
Speaker 1: copyright infringement. You know, it was going up without their
Speaker 1: consent and without their compensation, and in fact, in those days,
Speaker 1: YouTube wasn't monetizing anything. This was in the growth phase
Speaker 1: for YouTube, so the whole media industry was starting to
Speaker 1: get pretty prickly about this. And you know, just a
Speaker 1: few years earlier, that industry ended up banding together and
Speaker 1: did a number on peer to peer networking services like
Speaker 1: Kaza and Napster like they sued those companies into oblivion.
Speaker 1: So obviously YouTube was not super keen on get the
Speaker 1: studio's iire in that same way, it could be a
Speaker 1: threat to their very existence. So in March two thousand
Speaker 1: and six, YouTube issued a new limitation on videos. They
Speaker 1: could only be up to ten minutes long, and then
Speaker 1: you would get cut off, So you couldn't post a
Speaker 1: full television episode or a movie in one video. If
Speaker 1: you were really trying to share that kind of thing,
Speaker 1: you had to find places to break up the video
Speaker 1: into ten minute or shorter increments and then do a
Speaker 1: whole series of them. So you would have to go
Speaker 1: to a lot of trouble. In other words, in order
Speaker 1: to get just an episode of a television show up,
Speaker 1: let alone a movie. Plus you would still potentially get
Speaker 1: into trouble down the line if the studios found out, hey,
Speaker 1: you're publishing stuff without our permission. But this is why
Speaker 1: older YouTube videos, the really long stuff, would be divided
Speaker 1: into multiple parts. I'm reminded of the infamous Star Wars
Speaker 1: episode one review by Red Letter Media, the mister Plinkett
Speaker 1: review that was originally in several segments because old man
Speaker 1: mister Plinkett had a lot to say about it. Also,
Speaker 1: I didn't realize this episode was going to be so
Speaker 1: Star Wars heavy. That wasn't my intent. But in the
Speaker 1: back half of two thousand and six, Google acquired YouTube
Speaker 1: for the princely sum of one point sixty five billion
Speaker 1: dollars in Google stock. Google definitely had a vested interest
Speaker 1: in making certain that the piracy issue was addressed because
Speaker 1: as a big company that had deep pockets, and you know,
Speaker 1: there's nothing stopping the media companies from coming after that. Filthy,
Speaker 1: filthy luker. If Google seemed complacent with piracy while the
Speaker 1: company discouraged the practice, it's you know, the users who
Speaker 1: ultimately were steering things, and the folks at major media
Speaker 1: companies were not thrilled about not having control over this.
Speaker 1: You did have major studios establish their own YouTube channels,
Speaker 1: but I bet that didn't feel so great. To them. Either,
Speaker 1: YouTube could help with marketing and spread awareness of shows
Speaker 1: and that kind of thing, but monetizing your online publishing
Speaker 1: was a different matter. I mean, the official YouTube Partner
Speaker 1: program didn't launch until the end of two thousand and seven,
Speaker 1: and you know, most businesses are not keen to give
Speaker 1: away for free what they typically would earn revenue on,
Speaker 1: so finding a way to deliver television content online in
Speaker 1: a way that could actually generate revenue was a long
Speaker 1: term goal. Perhaps of more concern, however, was Apple, at
Speaker 1: least to NBC Universal's CEO Jeffrey Zucker at the time.
Speaker 1: This has to do with the media industry's challenge of
Speaker 1: figuring out how to incorporate streaming at all in its
Speaker 1: overall strategy, let alone how to set streaming up as
Speaker 1: a potential successor to broadcast in cable distribution. Apple already
Speaker 1: had an established business in which folks could browse the
Speaker 1: iTunes store for media content, which included television shows and films,
Speaker 1: and users could purchase those things through the iTunes store,
Speaker 1: which made Apple kind of a gatekeeper for media. Plus,
Speaker 1: Apple could take a hefty cut of those transactions, which
Speaker 1: means a lot less of that cheddar would make its
Speaker 1: way to the studios that were actually responsible for producing
Speaker 1: the content. And just as companies aren't keen to give
Speaker 1: away for free what they usually make money off of,
Speaker 1: they're also not super happy to share their lunch with
Speaker 1: someone else. Dollars going to Apple should be going to
Speaker 1: the studios. Gush, darn it. So this is what Jeff Zucker,
Speaker 1: the CEO of NBC Universal, was up in arms about.
Speaker 1: He proclaimed that iTunes, while an effective way to deliver
Speaker 1: television content to digital customers, was really a way to
Speaker 1: go quote from dollars into pennies end quote on those transactions,
Speaker 1: meaning that media outlets like NBC Universal should be making
Speaker 1: much more per transaction than what they were, and that
Speaker 1: the business model heavily favored the gatekeepers like iTunes. So
Speaker 1: what would be the solution. Well, the solution is to
Speaker 1: make your own media streaming platform, as Bender from Futurama
Speaker 1: would say, and you would control this platform. Zucker made
Speaker 1: some pretty big decisions leading up to the announcement of Hulu.
Speaker 1: He decided not to renew NBC Universal's contract with Apple,
Speaker 1: which meant NBC content would disappear from the iTunes store.
Speaker 1: He also had the company closed down the NBC Universal
Speaker 1: YouTube channel, so you couldn't get NBC Universal content there either,
Speaker 1: at least not legally, and all the while, NBC Universal
Speaker 1: began to work with newscre the owners of Fox at
Speaker 1: the time, to create what would become Hulu. All right,
Speaker 1: we're going to continue this story in just a moment,
Speaker 1: but first let's take a quick break to thank our sponsors.
Speaker 1: So we're back, News Corp. Owners of Fox, twentieth Century
Speaker 1: Fox at that time, and NBC Universal, which would soon
Speaker 1: become the property of Comcast, get together and decide that
Speaker 1: they want to make their own streaming thing, but they're
Speaker 1: not entirely sure what that's gonna be. Originally, the plan
Speaker 1: was to make a way to share or post content
Speaker 1: from these two companies on various places across the Internet,
Speaker 1: specifically on sites like Yahoo, Aol, and the king of
Speaker 1: social media MySpace. That's a trio of names that at
Speaker 1: one point in the Internet history, all three of those
Speaker 1: were considered unassailable. They were thought of as being giants
Speaker 1: and too big to fail, which really just proves the
Speaker 1: too big to fail concept just isn't true. You're never
Speaker 1: too big to fail. We humans can always find a
Speaker 1: way to fail if we have enough time on our
Speaker 1: hands to do it. Anyway, you probably know that you
Speaker 1: can embed media players on web pages, right If you've
Speaker 1: ever visited a web page that had a YouTube player
Speaker 1: embedded in that page, you know what I'm talking about.
Speaker 1: You can watch a YouTube video within a web page
Speaker 1: without actually having to go to YouTube itself. Well, that's
Speaker 1: what Hulu was trying to do originally. Of course, it
Speaker 1: wasn't called Hulu yet. In fact, it wasn't called anything yet.
Speaker 1: But the basic idea was to follow this particular strategy.
Speaker 1: So why were the companies thinking in this way? What
Speaker 1: largely had to do with the monumental acquisition that news
Speaker 1: Corp Had made In the summer of two thousand and five.
Speaker 1: News Corp bought MySpace for a whopping five hundred eighty
Speaker 1: million dollars. This would later turn out to be a
Speaker 1: colossal mistake, as news Corp would ultimately dump my Space
Speaker 1: for just thirty five million dollars in two thy eleven.
Speaker 1: So buying something for five hundred and eighty million and
Speaker 1: then selling it for thirty five million not great. In fact,
Speaker 1: for some it would rank as one of the worst
Speaker 1: deals in tech history. I don't know if it quite
Speaker 1: merits that because there have been some other whoppers that
Speaker 1: have happened, Like it's not good, but there have been
Speaker 1: other really bad ones. I will say that the MySpace
Speaker 1: acquisition is perhaps one of the most infamous bad tech deals. Anyway,
Speaker 1: NewsCorp had this social media platform, and they had it
Speaker 1: since late two thousand and five. And remember Facebook wouldn't
Speaker 1: really start its trajectory of crazy growth until late two
Speaker 1: thousand and six, when it would finally open up to
Speaker 1: people who weren't you know, college students. And it's easy
Speaker 1: to forget, but we're talking about time when MySpace was
Speaker 1: almost synonymous with social networks. I mean, nobody thinks about
Speaker 1: it today, but at the time it was the dominant
Speaker 1: social platform. So the thought was that this social platform
Speaker 1: asset could serve as a brilliant way to serve media
Speaker 1: to customers. You know, design a web delivery system that
Speaker 1: leverages the places where people were already going online. That
Speaker 1: would include the AOL landing page because tons of people
Speaker 1: were still using Aol as their Internet service provider, or
Speaker 1: the Yahoo landing page because Yahoo was essentially serving as
Speaker 1: a web portal to the rest of the world. Wide Web,
Speaker 1: and then MySpace the dominant social platform. You wouldn't have
Speaker 1: to train people to go to your website. You would
Speaker 1: just establish a foothold in the places where people were
Speaker 1: already congregating. This strategy would change in large part due
Speaker 1: to the companies coaxing a project leader from a different
Speaker 1: Internet giant. So I'm talking about a man named Jason Kylar,
Speaker 1: who was a senior vice president at Amazon, and he
Speaker 1: got lured away to become the head of this still
Speaker 1: unnamed project between newscre and NBC Universal. Now, Kaylar's career
Speaker 1: would have a lot of interesting intersection points with streaming
Speaker 1: in general and with Hulu in particular. So for example,
Speaker 1: before he worked at Amazon, Kyler was an analyst with
Speaker 1: the Walt Disney Company for a couple of years. Obviously,
Speaker 1: Disney will go on to become an important part of
Speaker 1: the Hulu story, and I might as well talk about
Speaker 1: his time after he left Hulu, because this isn't an
Speaker 1: episode about his career specifically, although he does play a
Speaker 1: very important part in this particular episode. He would stick
Speaker 1: with Hulu for six full years, which you know, it's
Speaker 1: not bad for a CEO of a startup company. If
Speaker 1: you're not like a founder, especially like he was brought
Speaker 1: on to do this, although you could argue that the
Speaker 1: work he did was at least equivalent to a regular founder.
Speaker 1: He would then go on to co found a video
Speaker 1: platform site called Vessel. He did that in twenty thirteen.
Speaker 1: Verizon would acquire Vessel, and not long after that, Verizon
Speaker 1: would shut down Vessel. But hey, you know that's a
Speaker 1: big payout, baby. So Kyler would also sit on the
Speaker 1: board of directors for several different organizations and companies, and
Speaker 1: then he would become CEO of WarnerMedia in twenty twenty,
Speaker 1: which means he was there during the early launch days
Speaker 1: of HBO Max, that streaming platform, and he stuck around
Speaker 1: as CEO of WarnerMedia until AT and T decided to
Speaker 1: divest itself of WarnerMedia and sell it off to Discovery,
Speaker 1: whereupon David Zaslov would take over the whole shebang. And
Speaker 1: we all know about the Zaslov regime over at Warner
Speaker 1: Brothers Discovery. So his departure, he's kind of been keeping
Speaker 1: himself busy by being on the board of directors of
Speaker 1: even more organizations and companies. But throughout his entire career,
Speaker 1: he's been heavily involved in media in general and streaming
Speaker 1: in particular, and it's a pretty impressive career. So Kyler
Speaker 1: comes over from Amazon and leads this project, and the
Speaker 1: strategy then starts to shift. It moves away from this
Speaker 1: idea of an embedible player that will live in other
Speaker 1: places to a destination media site similar to YouTube, but
Speaker 1: specifically crafted to host studio produced entertainment. Right YouTube is
Speaker 1: the user generated video site. You go to YouTube typically
Speaker 1: to watch stuff that other YouTubers have created, not to
Speaker 1: watch things that were produced by an established media company.
Speaker 1: So this project would be more for the established stuff,
Speaker 1: the studio stuff, the professional stuff, and the companies were
Speaker 1: also hoping that this would discourage Netflix's growing relevance. Again,
Speaker 1: Netflix really wasn't a threat yet, but the concern was
Speaker 1: that they didn't want a company that was not part
Speaker 1: of the established media industry to become the gatekeeper for
Speaker 1: the online branch of media. For the longest time, television
Speaker 1: and film studios had reigned supreme. They didn't have to
Speaker 1: answer to anyone else. Really, you know, they were times
Speaker 1: where they got broken up by various regulators and governments
Speaker 1: because they owned so much of the entertainment landscape that
Speaker 1: it was considered to be a monopoly. Like when a
Speaker 1: company owns not just the movie studios but also movie
Speaker 1: theaters and film processing companies, that becomes a problem. So
Speaker 1: all that got broken up years and years and years ago,
Speaker 1: but they still had a ton of power, so the
Speaker 1: idea of seeding some of that power to a company
Speaker 1: like Netflix was not very palatable when Kyler took over
Speaker 1: the project. The nickname that folks gave to this because
Speaker 1: it still didn't have an official name yet, was Clown
Speaker 1: Co or Clown Company, And apparently it got that nickname
Speaker 1: because the general consensus was any joint project that would
Speaker 1: be helmed by two or more established media companies was
Speaker 1: bound to fail. At some point, one company would try
Speaker 1: to exert more authority than the other or object to
Speaker 1: some fundamental aspect of the project, and nothing would ever resolve.
Speaker 1: You would never get consensus among the stakeholders for what
Speaker 1: was the right thing to do, and the whole thing
Speaker 1: would crumble in on itself. Tech blogs, in particular, prophesied
Speaker 1: doom from the get go. In July two thousand and seven,
Speaker 1: a company called Providence Equity joined News Corp. At NBC
Speaker 1: Universal as a stakeholder in the project, purchasing a ten
Speaker 1: percent ownership in Hulu, and this was quoted as being
Speaker 1: somewhere around one hundred million dollars of equity in the company.
Speaker 1: Just pretty darn impressive. Now, the name Hulu, I don't
Speaker 1: know exactly when it was arrived at, but I do
Speaker 1: know when it was revealed. It was revealed in August
Speaker 1: two thousand and seven when the website actually went live. However,
Speaker 1: this website went live with no video. You couldn't go
Speaker 1: there to watch anything. It was kind of like a
Speaker 1: site that was parked there and was announcing the name
Speaker 1: of the service, so there was no streaming player yet.
Speaker 1: Kyler later said that the actual name came from a
Speaker 1: Mandarin word that means gord, with the idea of Hulu
Speaker 1: containing all this stuff in it, it'd be a streaming
Speaker 1: service with access to lots of content, similar to a
Speaker 1: stuffed gord. I guess I don't know. I don't really
Speaker 1: get the analogy that much. I don't know how much
Speaker 1: the actual word was super important. The point is the
Speaker 1: name was short, it had a nice sound to it,
Speaker 1: it was easy to remember, and folks wouldn't make it
Speaker 1: so much fun of it, like you didn't hear people
Speaker 1: making as much fun of the name Hulu as they
Speaker 1: later would. For like Quibi Quibi was the source of
Speaker 1: endless jokes, Hulu, I don't remember a lot of people
Speaker 1: making fun of it. While the site would go into
Speaker 1: beta testing before the end of two thousand and seven,
Speaker 1: it would not officially launch as a service until October
Speaker 1: two thousand and eight. By that time, Netflix's streaming service
Speaker 1: had a year's head start, but Hulu had something that
Speaker 1: Netflix didn't have. Hulu, with its agreements with the various studios,
Speaker 1: which would change out fairly frequently in the year leading
Speaker 1: up to launch, would be able to host episodes of
Speaker 1: shows the day after they originally aired on TV. Netflix,
Speaker 1: by comparison, would only be able to add shows in seasons,
Speaker 1: So you would get an entire season of a show
Speaker 1: added to Netflix once the company had secured a licensing
Speaker 1: deal for that particular season, and then you could watch
Speaker 1: all the episodes in that season, but you wouldn't be
Speaker 1: able to see the latest stuff. Hulu was kind of
Speaker 1: the opposite. You could see the latest stuff, but you
Speaker 1: couldn't watch a full season early on. Hulu was free
Speaker 1: to use and it was also ads supported, but Kyler
Speaker 1: was also careful not to overload ads on episodes, which
Speaker 1: is something I wish other companies would practice. I'm not
Speaker 1: naming names, I'm not making any accusations about anyone specifically,
Speaker 1: but on a totally unrelated note, I am obligated to
Speaker 1: take another break to take our sponsors. We'll be right back. Okay,
Speaker 1: so we are back. And besides me being cheeky about ads,
Speaker 1: Kyler was very much aware of the effect ads have
Speaker 1: on viewership. He would later publish a blog post that
Speaker 1: would outline certain observations he had made while in the
Speaker 1: entertainment business, and one really big one was about ads. Specifically.
Speaker 1: He wrote in a memo that quote, traditional TV has
Speaker 1: too many ads. Users have demonstrated that they will go
Speaker 1: to great lengths to avoid the advertising load that traditional
Speaker 1: DV places upon them. Setting aside sports and other live
Speaker 1: events programming, consumers are increasingly moving to on demand viewing
Speaker 1: in part because of the lighter ad load end quote.
Speaker 1: To that end, Hulu typically limited ads to two minutes
Speaker 1: of advertising per half hour of content, which was far
Speaker 1: below what you would find if you were tuning in
Speaker 1: to live TV. For films, studios had the option to
Speaker 1: allow users in ad free experience during the film itself
Speaker 1: if in return, the users agreed to view ads up
Speaker 1: front before the film started. You've probably seen a message
Speaker 1: that was something like, thanks to our sponsors, you can
Speaker 1: watch the following presentation free of ads, or something like that.
Speaker 1: In that same memo in which Kyler pointed out the
Speaker 1: issue with ads, he also talked about how audiences were
Speaker 1: increasingly migrating to on demand viewing experiences. Traditional television requires
Speaker 1: viewers to watch on their schedule, not the viewers, So
Speaker 1: that's frustrating, right when you have to be available when
Speaker 1: the program airs. Technology started to allow for time shifting.
Speaker 1: I mean VCRs led the way, at least for those
Speaker 1: of us who are willing to learn how to set
Speaker 1: a VCR to record a specific channel at a specific time,
Speaker 1: which wasn't always user friendly or easy. Then we could
Speaker 1: watch the programming whenever we wanted to, not just when
Speaker 1: it was scheduled to air. More sophisticated methods like DVRs
Speaker 1: would make this far more easy and accessible, and audiences
Speaker 1: would respond to that. They really enjoyed the freedom that
Speaker 1: this represented. The era of must SETV was changing. We
Speaker 1: weren't necessarily glued to our couches on Thursday nights or whatever,
Speaker 1: and the arrival of on demand viewing made this even better.
Speaker 1: A service that let you select whatt to watch when
Speaker 1: you wanted to watch it without having to decide ahead
Speaker 1: of time, like without having to set a DVR or
Speaker 1: VCR a big deal. Hulu, despite a bumpy ride in development,
Speaker 1: was poised for great success. Sure, the media companies that
Speaker 1: signed on to be part of the project kept shifting around,
Speaker 1: which meant it was hard to predict what material would
Speaker 1: actually be available to viewers once Hulu went live, but
Speaker 1: it still set itself apart from both YouTube and Netflix.
Speaker 1: There were limitations, however. Typically Hulu would only have a
Speaker 1: handful of episodes available for viewing and would remove the
Speaker 1: oldest of those episodes while adding new episodes, so you
Speaker 1: might only be able to access the last few episodes
Speaker 1: of any given show, but you wouldn't be able to
Speaker 1: really dive into the entire history of a program. This
Speaker 1: was in an era in which Kylar was trying to
Speaker 1: establish Hulu and when companies were even learning which strategies
Speaker 1: would be viable, so like this was all very experimental.
Speaker 1: Everyone seemed to know that it would take time for
Speaker 1: streaming to shake out to become a sustainable model, and
Speaker 1: that this would mean that there'd be a lot of
Speaker 1: investment and trial and error in the early days, and
Speaker 1: that it would require careful thought to find a way
Speaker 1: to make streaming work long term on a financial level.
Speaker 1: That is. Meanwhile, the cord cutting apocalypse was kind of
Speaker 1: on the horizon. Now. It wasn't quite to the point
Speaker 1: where people were suddenly like severing their cable connections right
Speaker 1: out of the gate, but young adults who had spent
Speaker 1: more time consuming content online than through traditional media were
Speaker 1: less likely to become cable subscribers, and that meant that
Speaker 1: simply through attrition, the cable business was facing a crisis.
Speaker 1: So there was a healthy incentive in place for streaming
Speaker 1: platforms to figure it all out, and it really big
Speaker 1: incentive for traditional media companies to figure a strategy that worked,
Speaker 1: because if they didn't, they were kind of dooming themselves.
Speaker 1: In two thousand and nine, Disney would join the Hulu party. Literally,
Speaker 1: they purchased a stake in Hulu. Obviously, this was well
Speaker 1: before the Walt Disney Company would launch its own Disney
Speaker 1: Plus platform, so At this point, Disney, NBCU Universal, and
Speaker 1: NewsCorp each owned approximately equivalent portions of Hulu, and then
Speaker 1: you had ten percent left over for the investment company.
Speaker 1: Disney agreed to make available some of their older Disney
Speaker 1: films on the service, and they also chose Hulu as
Speaker 1: the home for ABC programming because Disney owns ABC as
Speaker 1: well as some of the originals that Disney had produced
Speaker 1: for the Disney Channel. Now, at this stage, Hulu was
Speaker 1: competing against a different streaming platform, and we're still not
Speaker 1: talking about Netflix here. Instead, we're talking about TV dot Com,
Speaker 1: which I had completely forgotten about. TV dot Com. I
Speaker 1: knew about it when it came out, but I hadn't
Speaker 1: thought about in years. But that was a company that
Speaker 1: CBS Corporation acquired in two thousand and eight because again CBS,
Speaker 1: since it wasn't a stakeholder in Hulu, wasn't exactly eager
Speaker 1: to allow these competing media companies to be gatekeepers for
Speaker 1: CBS materials. So instead they go out and they buy
Speaker 1: their own streaming platform. At one point, the partners behind
Speaker 1: Hulu had some of their programming on TV dot Com
Speaker 1: as well, but that would change when CBS took control
Speaker 1: and Hulu pulled all of its programs off TV dot com.
Speaker 1: The camps were starting to form around streaming, with no
Speaker 1: one wanting anyone else to be the dominant player or
Speaker 1: to be able to have leverage over them. The big
Speaker 1: networks continued their long standing rivalry, and pretty much all
Speaker 1: of old media was looking at Netflix with suspicion also YouTube.
Speaker 1: Even though YouTube, I would argue, wasn't really in the
Speaker 1: same space as the others, it was a hated rival
Speaker 1: among media companies because it was stealing a whole lot
Speaker 1: of eyeballs, kind of like the Corinthian in the Sandman comics.
Speaker 1: In twenty ten, Hulu introduced a subscription service called Hulu Plus.
Speaker 1: Now this was different from the Hulu Free service and
Speaker 1: that viewers would be able to access full current seasons
Speaker 1: of shows, not just the last few episodes. You could
Speaker 1: watch a full season at least the latest one. You
Speaker 1: couldn't necessarily watch every season of a Showers would also
Speaker 1: get earlier access to the latest episodes. Essentially, they'd be
Speaker 1: able to watch an episode when that show went to
Speaker 1: air on television, you could access it online if you
Speaker 1: were a Hulu subscriber. That subscription cost nine dollars ninety
Speaker 1: nine cents per month when it launched, and to the
Speaker 1: bewilderment of many, that service would still include ads supported content,
Speaker 1: so you're not paying to get ad free content, it
Speaker 1: would still get ads. Some folks asked why would there
Speaker 1: still be ads if you also had to pay a subscription,
Speaker 1: and the best answer seemed to be, we want money
Speaker 1: on that front. Twenty ten is also when Hulu planned
Speaker 1: to hold an IPO, or initial public offering. That's when
Speaker 1: a privately held company becomes a publicly traded company, but
Speaker 1: Hulu would in fact not go public that year. Ultimately,
Speaker 1: the stakeholders decided to keep it a privately held company,
Speaker 1: and there were rumors of a real IPO cropping up
Speaker 1: in late twenty twenty three, but as we will learn,
Speaker 1: that's not the path that the company, but he would
Speaker 1: ultimately take. One thing Hulu did fairly early on was
Speaker 1: to produce original content specifically for the Hulu platform itself,
Speaker 1: and this began in twenty eleven, which is two years
Speaker 1: before Netflix would do the same thing. So for the
Speaker 1: first few years, Hulu really just existed as a place
Speaker 1: where folks could go to watch recent television programs, and
Speaker 1: it was pretty handy if you happen to miss an
Speaker 1: episode of your favorite show, you know, if it was
Speaker 1: a show that was on a network that partnered with Hulu,
Speaker 1: at least you could potentially catch that episode starting the
Speaker 1: day after it originally aired, and you would also see
Speaker 1: fewer commercials than you would if you had watched it
Speaker 1: on television in the first place, which is not a
Speaker 1: bad deal. Before getting into the content game directly, Hulu
Speaker 1: also served as a place where web originals could find
Speaker 1: a home. So these were programs made by other companies
Speaker 1: but with the web in mind, as opposed to on
Speaker 1: traditional media. The first actual Hulu original was a show
Speaker 1: called The Morning After. This was a sort of pop
Speaker 1: culture roundup show. The first scripted series would come out
Speaker 1: in twenty twelve, and it was called battle Ground, which
Speaker 1: was a satirical political comedy series that the showrunners originally
Speaker 1: pitched as a TV show, but they couldn't find a
Speaker 1: network to pick up the series. Hulu provided an alternative
Speaker 1: pathway to find an audience. Hulu would increase its focus
Speaker 1: on original content, and this gradually meant that the original
Speaker 1: strategy of providing access to broadcast TV would start to
Speaker 1: decline in importance, and another shift was coming as well.
Speaker 1: Jason Kyler, who had led the company from when it
Speaker 1: was still taking shape in two thousand and seven, announced
Speaker 1: he would be resigning from the company in twenty thirteen. Now,
Speaker 1: under Kyler's leadership, Hulu had gone from this nebulous idea
Speaker 1: that the industry in general predicted was going to be
Speaker 1: a colossal failure and had created a business that had
Speaker 1: an upward revenue trajectory that was pretty impressive. For example,
Speaker 1: the Hollywood Reporter said that in twenty twelve, Hulu posted
Speaker 1: a sixty five percent increase in year over year revenue. However,
Speaker 1: percentages never tell you the full story, right Because if
Speaker 1: I gave you a dollar today and then tomorrow I
Speaker 1: gave you two dollars, that's a one hundred percent increase
Speaker 1: day to day. But that's still just two dollars or
Speaker 1: three dollars total. However, that being said, the twenty twelve
Speaker 1: revenue was six hundred and ninety five million dollars, which
Speaker 1: is not chump change or you know, clown company dollars,
Speaker 1: I guess. Also, by this time, the stakeholders had been
Speaker 1: whittled down to news Corp, NBC, Universal, and Disney because
Speaker 1: the three other stakeholders had bought out Providence Equities stake
Speaker 1: for around two hundred million dollars according to Bloomberg. Now,
Speaker 1: remember when Providence first invested, they were taking like one
Speaker 1: hundred million dollar equity steak in Hulu, so they essentially
Speaker 1: doubled that, which is not bad. Kylar wasn't the only
Speaker 1: executive leaving the company at that point. Another was the
Speaker 1: chief technology officer for Hulu, a guy named rich Tom,
Speaker 1: which you know, that's a great name. Oh you mean
Speaker 1: rich Tom. The rumor mill said that Kyler's decision was
Speaker 1: one fueled by frustration he had with his corporate overlords,
Speaker 1: that that Kyler had really wanted to secure more licensing
Speaker 1: deals in order to feature a wider spectrum of programming
Speaker 1: on Hulu, but that he was being stonewalled by the
Speaker 1: various corporate stakeholders and denied these. These budgets and licensing
Speaker 1: fees were growing pretty hefty, and this was largely because
Speaker 1: Netflix was pouring buckets of cash into its own strategy.
Speaker 1: And we'd get back to the conundrum that the media
Speaker 1: companies were in, so in an ideal world from the
Speaker 1: studio perspective, not the audience perspective. But if you're a studio,
Speaker 1: the ideal is that you would have your owned and
Speaker 1: operated streaming service specifically for your studio's output. And of course,
Speaker 1: as we go down the timeline, that's kind of what
Speaker 1: would happen, right, because we would get a bunch of platforms,
Speaker 1: ridiculous ones. You know, you look out there and you've
Speaker 1: got your your Peacock Paramount plus, CBS All Access, HBO Max.
Speaker 1: All of these would start to pop up many years
Speaker 1: further down the line, so we would see this kind
Speaker 1: of come to pass. But that's something that all these
Speaker 1: studios wanted early on. They just didn't have the infrastructure.
Speaker 1: They didn't invest in building that out. So back then,
Speaker 1: back in twenty thirteen, there were only a few options
Speaker 1: open to you. If you wanted to make your material
Speaker 1: available for streaming. You could sign on with Netflix, or
Speaker 1: you could sign on with Hulu. Anything else was seen
Speaker 1: as being a little too obscure to make much sense,
Speaker 1: like it just wouldn't be a good return on investment.
Speaker 1: And if you didn't sign licensing deals, well then you
Speaker 1: were leaving money on the table. So while studios weren't
Speaker 1: keen to turn a service like Netflix or Hulu into
Speaker 1: a gatekeeper. There weren't a lot of alternatives, and with
Speaker 1: Netflix willing to shell out crazy amounts of cash for licenses,
Speaker 1: it meant that Hulu was losing out. Now, as we
Speaker 1: would see, this isn't an episode about Netflix, but Netflix's
Speaker 1: strategy would ultimately be to invest more and more in
Speaker 1: original programming and kind of wean itself off of making
Speaker 1: these big licensing deals, which suited the studios fine because
Speaker 1: they would prefer to not have their stuff on Netflix
Speaker 1: if they could have it on their own platform anyway.
Speaker 1: The other big rumor behind Kyler's departure was that he
Speaker 1: was still focused on growing the business and his corporate
Speaker 1: overlords were hoping that he would switch more to a
Speaker 1: near term profit model. These two things are not always
Speaker 1: in alignment, right, because to grow often it means you
Speaker 1: have to spend more money, invest more. You're not going
Speaker 1: to see as big of a return. The folks who
Speaker 1: were owning the stakes were getting itchy. They wanted profit,
Speaker 1: and it also sounds like the various stakeholders were at
Speaker 1: odds with one another over how to even achieve the
Speaker 1: goals that they had, Like even when they had goals
Speaker 1: that were in common, they disagreed with how they should
Speaker 1: go about achieving those goals, and that put Hulu in
Speaker 1: kind of a corporate ug of war between the different stakeholders.
Speaker 1: So I wouldn't blame Kyler for a moment if that
Speaker 1: contributed to his decision to step down. I've been in
Speaker 1: corporate tug of wars in the middle of one, and
Speaker 1: it is the most frustrated I think I've ever been professionally. Anyway,
Speaker 1: it sounded kind of like the board level of Hulu
Speaker 1: was turning into what naysayers had been predicting back in
Speaker 1: the Clown Company days, right Like, it sounds like that's
Speaker 1: what was coming true. I already mentioned that Kyler would
Speaker 1: go on to co found a different video streaming site
Speaker 1: similar in some ways to YouTube, and that Verizon would
Speaker 1: subsequently acquire and then later shut down that website, and
Speaker 1: that Kyler then went on to become the CEO of
Speaker 1: Watermedia under at and T. Interestingly, in twenty sixteen, Time Warner,
Speaker 1: which would later become WarnerMedia, acquired a ten percent steak
Speaker 1: in Hulu. So again, those worlds would intersect a couple
Speaker 1: of times. I've said, like the corporate overlords of Hulu.
Speaker 1: The partnerships have changed over time, so at one time
Speaker 1: Warner was one of the owners. When Kyler announced that
Speaker 1: he was going to depart from Hulu in twenty thirteen,
Speaker 1: the company had yet to announce a replacement, and in fact,
Speaker 1: it took a little while before that would happen. It
Speaker 1: was a luxury that a privately held company can enjoy,
Speaker 1: I guess because if you're a publicly traded company, succession
Speaker 1: planning is something that investors take very seriously see also Disney.
Speaker 1: But eventually Hulu announced that Andy Forcell, who had been
Speaker 1: senior vice president of content at Hulu since two thousand
Speaker 1: and seven, would take on the job as an acting CEO.
Speaker 1: He would not be on that job for long. He
Speaker 1: would actually leave Hulu in late twenty thirteen. That's the
Speaker 1: same year that Kylar stepped down. So we're talking one
Speaker 1: year two different CEOs, really three, because the third one
Speaker 1: would take over after Forcell would leave, And interestingly, Forceell's
Speaker 1: journey would take him on to become the chief operating
Speaker 1: officer at Full Screen and then Ottermedia. Now, if you
Speaker 1: listen to my episodes about Rooster Teeth, those companies were
Speaker 1: going to sound familiar. He was part of that whole thing,
Speaker 1: and then ultimately would end up becoming the head of
Speaker 1: HBO Max over at WarnerMedia, which meant that once again
Speaker 1: he'd be working under his old boss, Kylar, who was
Speaker 1: the CEO of WarnerMedia at that time, and just like
Speaker 1: in twenty thirteen, Forceel would leave WarnerMedia around the same
Speaker 1: time that Kyler did after AT and T divested itself
Speaker 1: of WarnerMedia and sold it to Discovery. So time is
Speaker 1: a flat circle. Mike Hopkins, who had been president of
Speaker 1: Fox Networks Group, was then tapped to be CEO of Hulu,
Speaker 1: and this capped off an era in which many of
Speaker 1: the leaders who were part of the original team who
Speaker 1: built Hulu had at this point left the company. Reportedly,
Speaker 1: this had a pretty negative impact on employee morale. Hopkins
Speaker 1: would stick around for four years and provide some leadership
Speaker 1: stability at a time when it was sorely needed in
Speaker 1: the company. He would eventually leave Hulu to become chairman
Speaker 1: of Sony Pictures Television, and then after a couple of
Speaker 1: years of doing that, he would go on to join
Speaker 1: Ammazon on and became a senior vice president for Prime
Speaker 1: Video and Amazon Studios. But anyway, Hopkins takes the helmet Hulu,
Speaker 1: you might wonder what else was going on during his
Speaker 1: era as CEO, which went from twenty thirteen to twenty seventeen.
Speaker 1: That is what we're going to start to cover in
Speaker 1: the next episode, along with the story of where Hulu
Speaker 1: would go from there and how the company would reach
Speaker 1: where we are now, which is in this weird limbo
Speaker 1: because of a disagreement between Disney and Comcast over how
Speaker 1: much the company is actually worth. We'll touch back on
Speaker 1: that later this week. In the meantime, I hope you
Speaker 1: are all well and I'll talk to you again really soon.
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